Paying in your own currency at a foreign checkout

Everything below about currency choice at the point of payment comes from what actually happens rather than from what is supposed to.

What the offer actually is

When paying abroad or on a foreign site, you may be offered the choice of paying in the local currency or in your own. Choosing your own currency means the conversion is performed by the merchant's payment provider rather than by your card issuer. That provider sets the rate it uses and generally includes a margin, which is where the service earns its money.

The offer is presented as certainty, since you see a familiar figure rather than an unfamiliar one you would have to convert. The certainty is genuine, and so is the cost of it, and the two are rarely presented with equal prominence.

Why the framing works

A number in a currency you think in is easier to evaluate, and easier evaluation feels like better information. The alternative requires trusting a conversion you cannot see, which feels riskier even when it is usually cheaper. The screen often shows the rate being used, but a rate without a comparison is difficult for anybody to judge quickly.

Run the arithmetic and time pressure at a terminal, sometimes with a queue behind you, makes a considered comparison practically impossible. The decision is therefore made on comfort rather than on arithmetic, which is exactly what the design anticipates.

What happens if you decline

Declining means the charge is submitted in the local currency and your card issuer converts it under its own terms. Issuers apply their own scheme rate and may add a foreign transaction fee, which differs enormously between products.

Across a sale weekend, for many cards that combination is cheaper than the merchant-side conversion, but this is not universal and depends on your card. The only way to know is to read what your own issuer charges for foreign transactions, which is stated in its terms. That is a five-minute check you do once, and it settles the question for every future trip and foreign purchase.

Where the same choice appears

The offer shows up at payment terminals, at cash machines abroad, on foreign websites and inside some travel booking flows. Cash machines are a particularly common place for it, and the wording there can be easy to accept without reading. Some online checkouts make the currency a setting rather than a prompt, so the choice is made before you reach payment.

The number underneath says something else: changing the site currency can also change the price itself rather than only the conversion, which is a different mechanism.

Reading which of the two is happening prevents you from attributing a price difference to the wrong cause.

Disclosure rules and what they require

Several jurisdictions require that the rate and any margin be disclosed before you choose, and some require a comparison. The detail of those requirements differs and they apply to some payment types and locations and not to others.

Tracked over a quarter, disclosure improves the situation without removing it, because a disclosed margin is still a margin you agreed to pay. Where you were not given a choice at all, and the conversion happened anyway, that is worth raising with your card issuer. Keeping the receipt showing the currency charged is what makes such a query straightforward to pursue.

Prices, promotions and terms move constantly, so check the current number rather than this one.

A simple default

The workable default for most travellers is to pay in the local currency and let the card issuer handle the conversion. That default should be checked once against your own card's foreign transaction terms rather than adopted on faith.

Run the arithmetic and carrying a card chosen for low foreign transaction costs does more for a trip than optimising any individual payment. Where amounts are small, the difference is not worth thinking about and either choice is fine. Where amounts are large, the same percentage becomes real money and the default is worth applying deliberately.

The takeaway

Decide your default before you travel, because a payment terminal is the worst possible place to compare two exchange rates.

Decide what you would pay before you look at what they are asking.